Marcus Nurseries Inc.'s 2005 balance sheet showed total common equity of $2,050,000, which included $1,750,000 of retained earnings. The company had 100,000 shares of stock outstanding which sold at a price of $57.25 per share. If the firm had net income of $250,000 in 2006 and paid out $100,000 as dividends, what would its book value per share be at the end of 2006, assuming that it neither issued nor retired any common stock? (10p) a. $20.00 b. $21.00 c. $22.00

Question

Aarav Bernard

Business

23 May, 14:35

Marcus Nurseries Inc.'s 2005 balance sheet showed total common equity of $2,050,000, which included $1,750,000 of retained earnings. The company had 100,000 shares of stock outstanding which sold at a price of $57.25 per share. If the firm had net income of $250,000 in 2006 and paid out $100,000 as dividends, what would its book value per share be at the end of 2006, assuming that it neither issued nor retired any common stock? (10p) a. $20.00 b. $21.00 c. $22.00

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Darryl Vaughn · Answer 1

c. $22.00

Explanation:

The book value of the Marcus Nurseries Inc. share at the end of the 2006 shall be determined through the following mentioned formula:

Book value per share = Book value of the equity at the end of 2006/number of shares outstanding

Book value of equity at the end of 2006=Total equity at the start of 2006+net income for the year 2006 - dividend paid during the 2006.

Book value of equity=$2,050,000+$250,000-$100,000

=$2,200,000

Number of shares outstanding=100,000

Book value per share=$2,200,000/100,000=$22

So based on the above discussion, the answer is c. $22.00